The Trump Administration has used a variety of changes in fiscal policies---business and consumer tax cuts, de-regulation, increase in defense and domestic discretionary spending and tariffs on selected foreign goods---to help spur faster growth in the US economy.

An early report card on these initiatives shows a positive boost to growth, but it appears to stem more so from increases in government spending rather than the reduction in taxes. At the same time, the overall fiscal cost of these initiatives has been substantial, as the projected rise in the budget deficit for calendar year 2018 is likely to match the additional rise in nominal output.

During the first three quarters of 2018 real GDP growth has averaged 3.3%, or about 1 percentage faster than the growth rate of 2017 as well as the average growth rate of the current expansion. So based on this metric there has been a positive impact on economic activity.

Yet, the details are somewhat less bullish. The most direct and largest impact from the fiscal initiatives shows up in federal government spending. Real federal government spending, which had been a major drag on overall economic growth for the past 7 years, has increased at annual rate of 3.2% in 2018, led by the 4.5% gain in defense spending. And there is more in the pipeline based on recent passage of the defense spending authorization bill.

On the consumer side, the results are mixed. Real consumer spending is running at a 2.8% annualized rate in 2018, which is roughly in line with pace of spending gains of recent years. Yet, it is somewhat of a surprise that there is no evidence of an additional lift to spending even though consumer cash flow and confidence has been boosted. And on the housing side of the equation, real residential investment has declined for three consecutive quarters. That's not something one would expect following a reduction in individual taxes, but the change in tax law also reduced the tax benefits for homeownership especially at the high-end of the housing market so there are some negative feedback effects.

Business fixed investment has increased at annual rate of 7% during the first three quarters, well above the pace of the past few years. Yet the gain is somewhat deceiving. A large part of the jump in business investment spending is centered in mining and exploration, which is linked to the rebound in oil prices. Business investment on capital equipment has increased only 4.5% in 2018, below the 6% gain of 2017. So far, the reduction in business taxes appears to have had the biggest impact on corporate share repurchasing (not capital investment) as the dollar amount of share buybacks is on pace to set a new record in 2018.

The US trade deficit has widened in 2018, and its on pace to set a new record high. Nonetheless, it's far too early to make any assessment on how the Trump Administration policies are impacting foreign trade. The relatively large increase in merchandise imports in Q3 (+10.3%) was centered in consumer goods, signaling some front-loading of imports to avoid the proposed tariffs scheduled for Q4. And any benefits from newly negotiated trade deals will be not be visible for many years.

So far, the early report card on the economic effects on the Trump Administration initiatives would be no better than a B-, but one also needs weigh the added fiscal costs. The projected increase in the federal budget for calendar year 2018 is around $200 to $250 billion, which would basically match the additional growth in nominal GDP. It is not unusual for the budget deficit to increase during the first year of a reduction in taxes, but budget projections from the Office of Management & Budget show a similar trade-off between deficits and growth for the next few years.

Thus, adding the economic benefits with the fiscal costs the initial grade is no better than a C, and unless there is a better trade-off between growth and deficits in the future the final grade would be the same.